by Bryce Edwards

31 August 2010

Inequality in NZ: [5] David Bromell on the economy of ideas

What if we solved economic inequality by passing a law that ‘the ratio of the top income to the bottom income in New Zealand ought not to exceed six to one’? Apparently this would mean ‘that no New Zealander should have a gross weekly income of less than $270 ($14,000 per annum) or more than $1600’. On face value this sounds fair to me. It’s one of the ideas raised by Ministry of Social Development Principal Advisor David Bromell in a thoughtful article entitled ‘Income inequality and the economy of ideas’ (Download David Bromell) which is published in the latest Policy Quarterly journal, and is based on his presentation to the recent University of Otago symposium entitled ‘Why Economic Inequality Matters’. The overall argument of Bromell is that turning a ‘big idea’ like economic equality into public policy comes at a cognitive, economic and political price. For instance, one of the cognitive prices we would need to pay in New Zealand is to move away from the ‘politics of identity’ towards ‘a politics of social stratification, social mobility and economic equality’. [Read more below]

In part David Bromell’s article is essentially an in depth book review of The Spirit Level by Richard Wilkinson and Kate Pickett. And perhaps as a mild (and necessary) critique of the book, Bromell argues for a ‘political’ solution to economic ideology: ‘What is required is a concerted programme to address the cause of negative social outcomes by reducing economic inequality and social stratification and improving social mobility at the bottom’ (p.41). And perhaps aimed at people such as Labour Party MPs who are currently talking a great deal about economic inequality without coming up with any actual new or radical policies that will make much of a difference, Bromell, says ‘talk is cheap unless practicable proposals are developed to implement this “big idea”, with robust analysis of who will pay and how, and of the price we, as a society, will put on equality, as on our present levels of inequality’ (p.42). And thus Bromell puts forward a number of ideas. He also strongly emphasizes that the necessary economic policies required to combat inequality will have a significant economic and political price.

As an example, he also draws on some socialist theory as one potential way forward:

the late Brian Barry, a self-styled ‘democratic socialist’, proposed (1998, pp 22-24) that in order to avoid social exclusion, nobody ought to have less than half the median income, and only a few ought to have more than three times the median income. That is, the ratio of the top income to the bottom income in a society ought not to exceed six to one. Median weekly income in New Zealand for all people aged 15 years and over from all sources (including people with no source of income) in the June 2009 quarter was $538 (Statistics New Zealand, 2009). Barry’s proposal implies that no New Zealander should have a gross weekly income of less than $270 ($14,000 per annum) or more than $1600 ($84,000 per annum) (p.41).

Certainly, there would have to be significant changes to the New Zealand economic framework in order to advance any sort of real egalitarianism. Bromell says that a shift away from the market model is an important step:

If we think that Barry, and Wilkinson and Pickett, are right, then we cannot consistently maintain, at the same time, that the greatest good for the greatest number is best achieved by the unfettered operation of self-regulating markets. Nor can we base public policy on the ‘trickle down’ notion that if only the wealthy are able to earn more and keep more of their wealth, they will have an incentive to work harder, invest more, take more risks and drive economic development, which will eventually benefit those at the bottom (p.41).

One of the most interesting parts of Bromell’s article is his forceful acknowledgement that in New Zealand we are going to need to grapple with the issue of ‘identity politics’ if we are to progress the agenda of economic egalitarianism. In particular, the interplay between ethnicity and economic inequality need to be considered in a sophisticated way (and Bromell has published a very good book on ethnicity in NZ entitled Ethnicity, Identity and Public Policy). Bromell's thoughts on this are worth quoting at length:

Even if ideas and ways of thinking do not logically exclude one another, partially or completely, they can crowd each other out of thinking space and public discourse. For example, since the late 1980s, New Zealand’s population has become significantly more diverse, due to higher Maori and Pacific fertility rates, inter-ethnic partnering and parenting, and changing patterns of migration. New Zealand today has a more ethno-culturally diverse population than many other developed nations (Bromell, 2008, pp 21–57). This diversity, together with the Maori resurgence and the Treaty settlements process since the mid 1970s, has meant that public discourse for over 30 years has been dominated by a politics of identity rather than a politics of social stratification, social mobility and economic equality. This ‘crowding out’ of a politics of equality is regrettable, because at least in the short run, immigration and ethnic diversity tend to reduce social solidarity and social capital (Putnam, 2007). When public discourse focuses on social group identities, rather than on the common good and the norms of mutual support that underpin redistribution within a welfare state, political will to address economic inequality can be seriously compromised (Bromell, 2008, pp 295–99; 2009; cf. Banting, 2005; Banting and Kymlicka, 2006). The cognitive, or at least rhetorical, price of a politics of equality is that we may have to focus less on our differences than on what we have in common; less on social group identities and special rights than on our common identity, our common needs, our common good (p.41-42).

Bromell says towards the end of his article that ‘If Wilkinson and Pickett’s “big idea” is to get any political traction in New Zealand, then the electorate will have to want, and demand, a different kind of fairness, a different kind of future New Zealand’ (p.43), which is surely true, but perhaps missing the mark a bit. For if we want a ‘political solution’ to economic inequality we actually need some sort of political movement and political party or organization to be putting it on the public agenda, leading the way, and changing public opinion. Unfortunately there’s no strong sign of that happening yet. And surely we can’t just rely on governments being forced to pursue egalitarianism, as Wilkinson and Pickett apparently believe. Nonetheless, Bromell concludes his article correctly by stating, ‘Above all, a politics of equality will require a great deal of public debate about the kind of society we want to create here and the price we are willing to pay’ (p.44).

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Inequality in NZ: [5] David Bromell on the economy of ideas

What if we solved economic inequality by passing a law that ‘the ratio of the top income to the bottom income in New Zealand ought not to exceed six to one’? Apparently this would mean ‘that no New Zealander should have a gross weekly income of less than $270 ($14,000 per annum) or more than $1600’. On face value this sounds fair to me. It’s one of the ideas raised by Ministry of Social Development Principal Advisor David Bromell in a thoughtful article entitled ‘Income inequality and the economy of ideas’ (Download David Bromell) which is published in the latest Policy Quarterly journal, and is based on his presentation to the recent University of Otago symposium entitled ‘Why Economic Inequality Matters’. The overall argument of Bromell is that turning a ‘big idea’ like economic equality into public policy comes at a cognitive, economic and political price. For instance, one of the cognitive prices we would need to pay in New Zealand is to move away from the ‘politics of identity’ towards ‘a politics of social stratification, social mobility and economic equality’. [Read more below]